Konami Grp Corp Regulatory News (KNM)

22 May 2007 15:17

Konami Corporation22 May 2007 (Translation) Translation: This English translation has been prepared for general referencepurposes. The Company is not responsible for any consequence resulting from theuse of the English translation in place of the original Japanese text. In anylegal matter, readers should refer to and rely upon the original Japanese textof the press release dated as of May 22, 2007. May 22, 2007 KONAMI CORPORATION Representative: Kagemasa Kozuki, Representative Director and CEO Code Number: 9766 the first section of the Tokyo Stock Exchange Media Contact: Noriaki Yamaguchi, Representative Director and CFO Telephone Number: 03-5770-0573 Introduction of Countermeasures Against Large-Scale Acquisition of KONAMI CORPORATION Shares (Takeover Defense Measures) KONAMI CORPORATION (the "Company") hereby announces that its board of directorshas resolved in a meeting held on May 22, 2007 the details of "Countermeasuresagainst any large-scale acquisition of shares in the Company (takeover defensemeasures)" (the "Plan"), as the "Basic policy regarding the persons who controldecisions of the Company's financial and business policies" (as defined in themain paragraph of Article 127 of the Enforcement Regulations of the CorporateLaw, the "Basic Policy") and "An initiative to prevent decisions of theCompany's financial and business policies from being controlled by personsregarded as inappropriate under the Basic Policy" (Article 127, paragraph 2,sub-paragraph (ro) of the Enforcement Regulations of the Corporate Law), thisPlan has the purpose of ensuring and enhancing the corporate value of theCompany and, in turn, the common interests of shareholders. The Plan shall beintroduced subject to approval of shareholders at the 35th Ordinary GeneralMeeting of Shareholders of the Company scheduled to be held on June 28, 2007.Introduction of the Plan has been approved by the Company's auditors (all ofwhom are outside auditors) on the condition that the specific operation of thePlan be properly implemented. 1. Background to the establishment of the Basic Policy andIntroduction of the Plan (1) Business Characteristic of the Company (The Source of the Company'sCorporate Value) We place priority on our following corporate goal: "We, Konami Group ofCompanies(the "Group"), aim to be a business group from which people all aroundthe world have high expectations, through creating and providing people with'Valuable Time'. The principal management policies of the Group are to focus onshareholders, to maintain a good relationship with stakeholders includingshareholders, and to contribute to society as a good corporate citizen. TheGroup's desire to deliver wonder and excitement to people all over the worldthrough the creation and provision of "Valuable Time" built the present-daybasis of the Company and is its enduring corporate philosophy. In the "DigitalEntertainment Business", "Health Service Business" and "Gaming & SystemBusiness", the Group is commercially expanding and, with continued advances innetwork environments, various kinds of user information are coming to be sharedand communities are forming globally, accompanied by a diversification ofpreferences. The Company moved to a holding company structure on March 31, 2006for the purpose of maximizing products and services it produces in the areas of"Entertainment" and "Health", with management and executive functions clearlyseparated. It has endeavored to establish a corporate structure which canrespond quickly to changes in users' demands and improve corporate value.Intending to further improve efficiency of operations and aiming at integrationo by enhancing communication within the Group, the Company centralized itsoffices, which were previously dispersed in various places in Tokyo, in TokyoMidtown in April 2007. Pursuant to the specific management policies of "International Standards", "FairCompetition" and "Pursuit of High Profits", the Group is endeavoring to ensureand improve corporate value and the common interests of shareholders by furtheraiming to optimize use of the Group's management resources and continuously andstably growing and expanding the sources of corporate value. (2) Basic Policy The Company believes that, since we have decided to have the shares of theCompany be available to be sold or purchased through public exchanges, thedecision on whether to accept any proposal of a large-scale acquisition ofshares in the Company, and accordingly the method of gaining control over theCompany, should ultimately be made based on the will of the shareholders. Onthe other hand, as stated in (1) above, the Company believes that, in order toutilize the accumulated management resources at a maximum level, which is thesource of corporate value, construction of the common interests of shareholdersand enhancement of the Group's brand value, it is essential to have stablemanagement from a mid-to-long term perspective and sufficient understanding ofaccumulated management resources. Therefore, we think that if the onecontrolling the decisions of the Company's financial and business policies lackssufficient understanding about the Company, the corporate value of the Companyand, in turn, the common interests of its shareholders would be harmed. We believe that, although the Company engages in IR activity for shareholdersand investors to help their understanding about the proper value of the sharesof the Company, it is very important for shareholders in order to make properdecisions on whether or not to accept a sudden proposal of a large-scaleacquisition to ensure the provision of necessary and sufficient information, aswell as time enabling them to make a proper decision which will be achieved byprovision of sufficient information by such a large-scale acquirer, and theevaluation and opinion, etc. thereon by the board of directors of the Companywho have a sufficient understanding of the business characteristics of theCompany. In addition, we think that information such as the effect of suchlarge-scale acquisition upon the Company, the management policy and substance ofbusiness plans of the large-scale acquirer in case it participates in themanagement of the Company, and the opinion of the board of directors of theCompany regarding such acquisition, is important for the shareholders of theCompany who intend to hold the shares of the Company on a long term basis. Fromthese points of view, the Company, for the purpose of ensuring and enhancingcorporate value and the common interest of shareholders, believes it isnecessary for the shareholders of the Company in making a determination that thelarge-scale acquirer who proposes a large-scale acquisition provide the board ofdirectors of the Company with the necessary and sufficient information aboutsuch acquisition beforehand, and that there is a certain evaluation periodduring which the board of directors of the Company makes an evaluation beforethe proposal passes subject to certain rules set forth and disclosed by theCompany beforehand (Please refer to 3. (4) below for detail, the "TheLarge-scale Acquisition Rule"). Based on the foregoing, we believe that in the event that a large-scale acquirerdoes not comply with the Large-scale Acquisition Rule, or in the exceptionalcase where there is a possibility that the corporate value or common interest ofshareholders of the Company would be significantly impaired even if thelarge-scale acquirer complies with the Large-scale Acquisition Rule, it isnecessary to ensure and enhance corporate value and the common interest ofshareholders of the Company by taking an appropriate measure to the extentpermitted by laws and regulations and the articles of incorporation when it isinappropriate for such large-scale acquirer to be a person who controls thedecisions of the Company's financial and business policies. The Company has decided to make the foregoing matter as part of its e BasicPolicy. At this point, the Company has not received any notice, approach or suggestion,etc. of a large-scale acquisition by any particular third party. 2. Efforts for Ensuring and Enhancing Corporate Value and CommonInterests of Shareholders (1) Moving to a Holding Company System The Group has achieved various reforms in recent years such as restructuring theDigital Entertainment Business through the merger with game software producingand sales subsidiaries, and restructuring of the Health Service Business inresponse to growing health awareness, aiming at constructing a system to developits management strategy for the next ten years. In completing the grouprestructuring, the Company and the Group moved to a holding company structure onMarch 31, 2006 and commenced a new style of management under a holding companystructure with three main business segments: "Digital Entertainment Business","Health Service Business" and "Gaming & System Business". The reason forselecting a holding company structure is that the Company considered itnecessary to develop into a flexible business entity in response to rapidlychanging market circumstances. While international standardization ofaccounting standards requires a shift to full-fledged consolidated management,the ubiquitous information society has been widespread in the entertainmentindustry, with the diffusion of broadband and innovation of digital technologyand communication technology. In addition, people are increasingly concernedwith the maintenance and control of their own health, based on the continuedageing of society and medical and welfare system reforms. Hence we seek toemploy a style of business management that takes on future changes in advance,while the holding company is tasked with formulation of management strategy ofthe Group as a whole and checking the performance of each operating company, andthe operating companies implement management by making timely decisions in theirbusiness fields. Also, the Company seek to realize "Further improvement oftransparency of management", "Structure of expeditious management system" and"System of thorough responsibility for revenue", which are the merits of aholding company system, at a maximum level, and fulfill the socialresponsibility of the Group as well as enhance the corporate value of the Groupand shareholders' value. The Company will, through the efforts stated above, try to ensure and enhancecorporate value and the common interest of shareholders. (2) Establishment of midterm plan In the midterm plan for the fiscal year ending March 2009, the Company set atarget of 330 billion yen in consolidated net sales, 45 billion yen inconsolidated operating profit and 26 billion yen in consolidated net profit. Toachieve this midterm plan, we, in our Digital Entertainment Business, constantlyaim to create new and attractive contents, and at the same time, maximize thebenefits by actively promoting a multifaceted expansion of the contentssupported by users. In our Health Services Business, in addition to moreeffective facility management based on a system with appropriate measures ofprofitability, including advance depreciation of expenses, etc.. We will alsofocus on new businesses such as distribution of health goods (fitness machines,care prevention machines, supplements, etc.), services for the elderly andhealth promotion business. In our Game and System Business, together withproviding gaming machines to the expanding global market, we will build a solidrevenue base by securing fixed income sources such as casino management systemand profit-share style sales. We hope to achieve our midterm plans by stronglypromoting our three businesses. We believe these efforts based on the midterm plan will reduce the risk of theappearance of a large-scale acquirer who would seriously undermine the Company'scorporate value and the common interest of shareholders, and are deemed toconform with the above Basic Policy. (3) Reinforcement of corporate governance The Company has the basic policy of business management to "value shareholders"and "maintain a good relationship with stakeholders, including shareholders, andcontribute to society as a good citizen". We recognize that the reinforcementof corporate governance is a vital mechanism to maintain and develop such basicpolicy, and we constantly work on structural improvements complying with thestrictest standard at the time. In recent years, while the legal system ofJapan on corporate governance has been rapidly changing, in 2002, shares of theCompany were listed on the New York Stock Exchange, which employs strict listingstandards, and the Company has developed a structure complying with theSarbanes-Oxley Act of 2002 of the U.S.A. ("SOX"), which was established totighten regulations for audit systems, corporate governance, disclosure, etc.After that, we steadily proceeded with preparations to comply with the Japaneseversion of SOX, or the Financial Instruments and Exchange Law of Japan("J-SOX"), which will be to similar to SOX. Also, in making structuralimprovements, we stress mostly the establishment of a system with efficiency andreliability and the development of an organizational environment which canprevent any fraudulence and illegality through high ethical standards of eachcorporate staff member. We believe such efforts will enhance the Company's corporate value and, as aresult, will reduce the risk of the appearance of a large-scale acquirer whowould seriously undermine the Company's corporate value and the common interestof shareholders, and are deemed to conform with the above Basic Policy. 3 Purpose of the introduction of the Plan (1) Purpose and necessity of the introduction of the Plan As stated in paragraph 2 above, the Company continues to promote our efforts toenhance corporate value and to secure the common interests of shareholders onthe basis of mid-to-long term management strategies under a holding companystructure. However, in recent years, due to the unwinding of cross shareholding,the development of a new legal system and a change in corporate culture, therehas emerged a trend of sudden hostile acquisitions of large quantities of shareswithout any process of discussion with the management of the target company orobtaining the approval thereof, has. As stated in the Basic Policy in paragraph 1 (2) above, the Company is a publiccompany and we believe that the decision on whether to accept any proposedlarge-scale acquisition of shares of the Company should ultimately be made byshareholders. However, the Company considers that in order to enhance itscorporate value continuously and to protect the common interest of shareholders,it is important for each segment of the Company to create synergy and enhancethe brand of the entire Group. Also, an understanding of the Company'scorporate value with the expert knowledge/skill/know-how of "amusement" and"health", which has been acquired over the years, would be difficult to obtainwithout understanding of the Company's business characteristics. Given this factor, as stated in paragraph 1 (2) above, the Company considersthat anyone who conducts a large-scale acquisition of its shares should, to helpthe decision of shareholders, provide the Company's board of directors withnecessary and sufficient information regarding such action complying with theLarge-scale Acquisition Rule which will be established and publicized by theCompany, and should commence such acquisition only after the elapse of a certainevaluation period during which the evaluation will be made by the Company'sboard of directors. As of March 31, 2007, 25% of the Company's issued and outstanding shares (exceptfor treasury shares) were held by foundations and financial groups in which theCompany's board members are engaged. However, since the Company is a publiccompany, we cannot deny the possibility that such foundations and financialgroups would decide to sell or transfer the Company's shares in the future.Also, in the process of the Group's growth in the future, there is a possibilityof fund raising from capital markets and, in that event, the shareholding ratioof the above shareholders would be diluted. These reasons indicate that transferability of the Company's shares would beincreased further and, accordingly, there is an undeniable possibility of alarge-scale acquisition undermining the Company's corporate value, including theinterests of shareholders, customers, business partners, employees and otherstakeholders, and by extension, undermining the common interests ofshareholders. Based on the above, the Company's board of directors has decided to introducethe Plan, conditional to the approval of shareholders at the 35th generalmeeting of the shareholders. The status of the Company's major shareholders asof March 31, 2007 is as stated in the exhibit 3 "Present Status of MajorShareholder of the Company" attached hereto. (2) Outline of the Plan The Plan consists of the following: in case that a large-scale acquisition ofthe Company's shares are conducted, in order to ensure information and the timenecessary and sufficient for the shareholders to make an appropriate decision,the Company's board of directors may apply the "Large-scale Acquisition Rule"(see section (4) below for details) which requires submission of informationwith respect to the large-scale acquisition and ensures time for evaluation andinvestigation. In addition, the Large-scale Acquisition Rule requires theLarge-scale Acquirer to comply with the rule, and determines the response policyfor in case of both compliance and non-compliance of the Large-scale AcquisitionRule by the large-scale acquirer, and if necessary, implements an appropriatecountermeasure to protect the Company's corporate value and the common interestsof shareholders such as gratis allotment of Stock Acquisition Right withdiscriminative condition to exercise. In case of non-implementation ofcountermeasures, a decision of shareholders will be sought after the periodstated in the Rule has elapsed. (3) Targeted Large-scale Acquisition The Plan shall be applied if there is an action that falls under (a) or (b)below, or an action or a proposal similar to it (hereinafter "Large-scaleAcquisition"), provided, however, that acquisitions to which the Company's boardof directors agree in advance shall not be included in such actions. One whoconducts a Large-scale Acquisition shall be called a "Large-scale Acquirer". (a) An Acquisition that would result in the holding ratio ofshare certificates, etc.(kabuken tou hoyuu wariai)(1) of a holder (hoyuusha)(2)amounting to 20% or more of the share certificates, etc. (kabuken tou)(3) issuedby the Company; or (b) An acquisition(4) that would result in the owning ratio ofshare certificates, etc. (kabuken tou shoyuu wariai)(5) of share certificates,etc.(kabuken tou)(6) relating to the acquisition and the owning ratio of sharecertificates, etc. of a person having a special relationship (tokubetsukankei-sha)(7) totaling at least 20% of the share certificates, etc. issued bythe Company. (1) Defined in Article 27-23(4) of the Securities and Exchange Act of Japan. Inthis case, the amount of owned shares (defined in Article 27-23(4) of theSecurities and Exchange Act of Japan) by joint holders of applicable holder(joint holders defined in Article 27-23(5) therein, including persons who aretreated as joint holders based on the Article 27-23(6) therein (includingpersons considered to fall under this provision by the board of directors of theCompany) This definition is applied throughout this document.) shall be added.This definition is applied throughout this document. (2) Including persons described as a holder under Article 27-23(3) of theSecurities and Exchange Act of Japan (including persons considered to fall underthis provision by the board of directors of the Company). This definition isapplied throughout this document. (3) Defined in Article 27-23(1) of the Securities and Exchange Act of Japan.Unless otherwise provided for in this document, this definition is appliedthroughout this document. (4) Defined in Article 27-2(1) of the Securities and Exchange Act of Japan.This definition is applied throughout this document. (5) Defined in Article 27-2(8) of the Securities and Exchange Act of Japan.This definition is applied throughout this document. (6) Defined in Article 27-2(1) of the Securities and Exchange Act of Japan.This definition is applied in (b). (7) Defined in Article 27-2(7) of the Securities and Exchange Act of Japan(including persons considered to fall under this provision by the board ofdirectors of the Company); provided, however, that persons provided for inArticle 3(1) of the Cabinet Office Regulations concerning Disclosure of a TenderOffer by an Acquirer other than the Issuing Company are excluded from thepersons described in Article 27-2(7)(i) of the Securities and Exchange Act ofJapan. This definition is applied throughout this document. With regard to the total number of voting rights (defined in Article 27-2(8) ofthe Securities and Exchange Act of Japan) and the total number of shares issued(defined in Article 27-23(4) of the Securities and Exchange Act of Japan) usedfor the calculation of each stock certificated, etc. owned, those written in anannual securities report, semi-annual report, status report on purchase of theCompany's own share and other documents which were most recently submitted inaccordance with the Securities and Exchange Act of Japan (including itssuccessive laws. The same shall apply throughout this document). (4) Details of the Large-scale Acquisition Rule (1) Request for the provision of the Large-scale Acquisition information The Company will require any Large-scale Acquirer to submit to the Company'sboard of directors, in a form prescribed by the Company, before effecting theAcquisition, a written undertaking that the Large-scale Acquirer will complywith the procedures established by the Large-scale Acquisition Rule (hereinafterthe "Statement of Intention"). Within 10 business days from the receipt of suchStatement of Intention, the board of directors delivers to the Large-scaleAcquirer a list of Large-scale Acquisition information which should be providedinitially by the Large-scale Acquirer. If the Company's board of directorsdetermines that the information provided is insufficient as Large-scaleAcquisition information, it may fix an appropriate deadline for response andrequest the Large-scale Acquirer to provide additional Large-scale Acquisitioninformation after consulting with the Independent Committee stated in paragraph5 (1) below as necessary. Also, the fact that there is a proposal for aLarge-scale Acquisition, as well as the information provided to the Company'sboard of directors, shall be disclosed in whole or in part at a time deemedappropriate. Some items of the Large-scale Acquisition information to be provided by theLarge-scale Acquirer shall be as follows. (a) Details (specifically including name, capital structure andfinancial position) of the Large-scale Acquirer and its group (including jointholders, persons having a special relationship and, in the case of funds,partners and other constituent members). (b) The purpose, method and terms of the Acquisition (including theprice and type of the consideration for the Acquisition, the timeframe of theAcquisition, the scheme of any related transactions, the legality of theAcquisition method, and the probability that the Acquisition will be effected). (c) The basis for the calculation of the purchase price of theAcquisitions (including the underlying facts and assumptions of the calculation,the calculation method, the numerical data used in the calculation, and thedetails and calculation base of any expected synergetic effect from any seriesof transactions relating to the Acquisition (including the synergetic effectthat is to be shared with other shareholders) as employed in the calculation). (d) Financial support for the Acquisition (specifically including thename, financing methods and the terms of any related transactions of the fundsproviders for the Acquisition (including all indirect funds providers)) (e) Post-Acquisition management policy, business plan, financial plan,capital and dividend policies for the Company and the Group. (f) Post-Acquisition policies dealing with the Company's and theGroup's employees, trade union, customers, business partners, local communityand any other stakeholders. (g) Specific measures to avoid any conflict of interest with othershareholders in the Company (h) Items regarding compliance with the "Act on Prohibition of PrivateMonopolization and Maintenance of Fair Trade" and other laws. (i) Any other information that the Company's board of directors or theIndependent Committee reasonably considers necessary All the provided information, notice/contact and negotiation to and with theCompany's board of directors, including the Statement of Intention, only if inJapanese, shall be deemed to be valid. (2) Evaluation and Consideration of Acquisition terms (i) Evaluation and Consideration by the Company's board of directors The Company's board of directors shall be, after the Large-scale Acquirercompletes the provision of the Large-scale Acquisition information to theCompany's board of directors, given the following period of time for evaluation,consideration, negotiation, opinion making and preparation of an alternativeproposal (hereinafter the "Evaluation Period of Acquisition") in accordance withthe degree of difficulty for evaluating and considering the Large-scaleAcquisition. Accordingly, the Large-scale Acquisition shall commence only afterthe elapse of the Evaluation Period of Acquisition. (a) In case of acquisition of all of the Company's share certificates, etc.through a tender offer with the consideration being cash (in yen) alone: 60 days (b) In cases of other Large-scale Acquisition : 90 days During the Evaluation Period of Acquisition, the Company's board of directorswill fully evaluate and review the Large-scale Acquisition information providedwhile, as deemed necessary, receiving advice from outside experts (includingfinancial advisors, certified public accountants, lawyers, consultants and otherexperts), and shall carefully organize and publish the Company's opinion.Further, the Company's board of directors may negotiate the terms of theAcquisition with the Large-scale Acquirer as necessary and may present its ownalternative plan to the shareholders. (ii) The Independent Committee consideration and recommendation to theCompany's board of directors The Company's board of directors, in addition to the evaluation andconsideration described in (i) above, upon taking receipt of the Large-scaleAcquisition information from the Large-scale Acquirer, will consult theIndependent Committee on consideration of the terms of Large-scale Acquisition,information gathering and comparative investigation regarding business plans ofthe Company's board of directors and the Large-scale Acquirer, and the proprietyof taking a countermeasure. The Independent Committee shall, during the Evaluation Period of Acquisition,evaluate the terms of the Acquisition from the perspective of securing andimproving the Company's corporate value and common interests of theshareholders, and, in accordance with "Countermeasure Policy in Case of aLarge-scale Acquisition" described in chapter (5) below, make recommendations,including the propriety of taking a countermeasure, to the Company's board ofdirectors. The Independent Committee may, as necessary, receive advice from outside expertsupon the consideration of the terms of the Acquisition and make a recommendationto the board of directors. Additionally, if the Independent Committee, itselfor through the Company's board of directors, requests the Large-scale Acquirerto provide materials for consideration or any other information, or to discussand negotiate with the Independent Committee, the Large-scale Acquirer shallpromptly respond to such request. In case the Independent Committee does not reach a recommendation for either theimplementation or non-implementation of countermeasures by the expiry of theEvaluation Period of Acquisition, the Independent Committee will, to thereasonable extent that it is necessary for actions such as consideration of theterms of Large-scale Acquisition, negotiation with the Large-scale Acquirer andpreparation of alternative proposal, pass a resolution to extend the EvaluationPeriod of Acquisition. In that case, the Company shall promptly disclose thespecific period and the reason for such extension. Also, the same procedureshall be taken if further extension of period is needed after such extension. (3) Resolutions of the Company's board of directors The Company's board of directors will pass a resolution relating to theimplementation or non-implementation of the countermeasures, taking intoconsideration any recommendation of the Independent Committee to the maximumextent. For the board of directors' resolution to implement countermeasures,prior approval by the majority of the corporate auditors shall be required.Promptly after passing such resolution, the Companyfs board of directors willdisclose an outline of its resolution, and any other matters that the board ofdirectors considers appropriate. (5) Countermeasure policy in response to the Large-scale Acquisition (i) In the case where a Large-scale Acquirers does not comply with theLarge-scale Acquisition Rule If a Large-scale Acquirer does not comply with the Large-scale Acquisition Rule,regardless of the specific acquisition method, the board of directors may takeappropriate measures provided for in the Corporate Law or any other laws and theArticles of Incorporation of the Company as countermeasures to the Large-scaleAcquisition in order to protect the corporate value of the Company and thecommon interests of the shareholders. As one of such measures, the Company mayimplement the gratis allotment of Stock Acquisition Rights asset out below atsection 6, 'Outline of Countermeasures'. The board of directors will determinewhether or not the Large-scale Acquirer complies with the Large-scaleAcquisition Rule, and the propriety of the countermeasures and its specificmethod by referring to advice from outside experts, etc. and respecting therecommendation of the Independent Committee to the maximum extent possible. (ii) In the case where a Large-scale Acquirers complies with theLarge-scale Acquisition Rule If a Large-scale Acquirer complies with the Large-scale Acquisition Rule, theboard of directors will not, in principle, trigger the countermeasures to theLarge-scale Acquisition even if it opposes such Acquisition. However, the boardof directors may express opposition to the Large-scale Acquisition, offeralternative proposals or explain to the shareholders. The shareholders will berequired to determine whether to accept the acquisition proposal of theLarge-scale Acquirer, taking into consideration details of such proposal and theopinions of the Company's board of directors with respect to the proposal andany alternative proposal presented by the Company. However, even if the Large-scale Acquirer complies with the Large-scaleAcquisition Rule, when the Large-scale Acquisition is deemed to have a materialadverse effect on the corporate value of the Company and the common interests ofthe shareholders, the Company's board of directors may take appropriateexceptional measures to protect the corporate value of the Company and thecommon interests of the shareholders as countermeasures to such Acquisition. Asone of such appropriate measures, the Company may implement the gratis allotmentof Stock Acquisition Rights as set out below in section 6, 'Outline ofCountermeasures'. Specifically, if it is considered that the Large-scaleAcquisition falls under any of the items below, the Company will deem that such Acquisition has a material adverse effecton the corporate value of the Company and the common interests of theshareholders. If it is considered that the Large-scale Acquisition does notfall under any of the items below, the Company will not trigger thecountermeasures. The board of directors will determine the propriety of thecountermeasures and the specific method, by referring to advice from outsideexperts, etc. and respecting the recommendation of the Independent Committee tothe maximum extent possible. (a) A buyout of share certificates that require such share certificatesto be compulsorily purchased by the Company at an inflated price; (b) Management that achieves an advantage for the Large-scale Acquirerto the detriment of the Company, such as temporary control of the Company'smanagement for the low-cost acquisition of the Company's material assets; (c) Diversion of the Company's assets to secure or repay debts of theLarge-scale Acquirer or its group company; (d) Temporary control of the Company's management to bring about adisposal of high-value assets that have no current relevance to the Company'sbusiness, and declaring temporarily high dividends from the profits of thedisposal, or selling the shares at a high price taking advantage of theopportunity afforded by the sudden rise in share prices created by thetemporarily high dividends; (e) Certain acquisitions that threaten to have the effect of forcingshareholders into selling share certificates, such as coercive two-tiered tenderoffers (meaning acquisitions of share certificates, including tender offers thatdo not offer to acquire all shares in the initial acquisition, and setunfavorable acquisition terms for the second stage or do not set clear terms forthe second stage); (f) Acquisitions whose terms (including amount and type ofconsideration, the acquisition schedule, the legality of the acquisition method,the probability of the acquisition being effected) are significantly inadequateor inappropriate in light of the Company's intrinsic value; or (g) Acquisitions that materially threaten to harm the corporate valueof the Company and, in turn, the common interests of shareholders by destroyingrelations with stakeholders of the Company such as employees, customers,business partners and creditors, which are indispensable for realization of acontinuous rise in the corporate value. (iii) Suspension of triggering countermeasures The board of directors may hold discussions or negotiations with the Large-scaleAcquirer as necessary and, even after the board of directors determines thegratis allotment of Stock Acquisition Rights as countermeasures, if the board ofdirectors determines that it is not reasonable to trigger the countermeasures,including cases where the Large-scale Acquirer offers a material change in thematters upon which the decision on the acquisition proposal was made, and thereis no Large-scale Acquisition, may suspend the countermeasures such as thegratis allotment of Stock Acquisition Rights. With regard to the effects onshareholders and investors in the case of such suspension of triggeringcountermeasures, please see section 6 (2) set out below. (6) Outline of countermeasures (gratis allotment of the StockAcquisition Rights) An outline of the gratis allotment of the Stock Acquisition Rights ascountermeasures to the Large-scale Acquisition in the Plan is as follows. (i) Shareholders eligible for allotment and number of the StockAcquisition Rights The Company will implement a gratis allotment of the Stock Acquisition Rights tothose shareholders other than the Company who appear or are recorded in theCompany's final register of shareholders or register of beneficial shareholderson a certain date determined by the Company's board of directors (the "RecordDate of Allotment"), at a ratio of one Stock Acquisition Right for every oneshare held. (ii) Effective date of gratis allotment of the Stock Acquisition Rights The Company's board of directors will determine the effective date of the gratisallotment of the Stock Acquisition Rights in the gratis allotment resolution. (iii) Type and number of shares to be acquired upon exercise of theStock Acquisition Rights The type of shares to be acquired upon exercise of Stock Acquisition Rightsshall be common stock of the Company, and the number of shares of the Company tobe acquired upon exercise of each Stock Acquisition Right shall be a numberdetermined by the board of directors less than one share per one StockAcquisition Right; provided, however, that if the Company conducts a stock splitor reverse stock split, it shall make necessary adjustments. (iv) Total number of the Stock Acquisition Rights for allotment The total number of Stock Acquisition Rights for allotment will be the numberdetermined by the board of directors up to the issued shares of the Company onthe Record Date of Allotment (excluding the number of shares of the Company heldby itself at the same time). (v) The amount to be contributed upon exercise of the Stock AcquisitionRights The amount to be contributed upon exercise of each Stock Acquisition Right shallbe an amount determined by the board of directors no less than one (1) Yen. (vi) Restriction of assignment of the Stock Acquisition Rights Any acquisition of Stock Acquisition Rights by assignment requires the approvalof the Company's board of directors. (vii) Exercise period of the Stock Acquisition Rights The commencement date will be a date determined by the board of directors in thegratis allotment resolution, and the period will be a period from one month tothree months as determined by the Company's board of directors. (viii) Conditions for Exercise of Stock Acquisition Rights Principally, the following parties (a) through (d) below (the "NonqualifiedPersons") may not exercise the Stock Acquisition Rights: (a) the Large-scale Acquirer; (b) joint holders of the Large-scale Acquirer; (c) persons having a special relationship with the Large-scaleAcquirer; or (d) any affiliated party of any party falling under (a) through (d) (aperson to substantially control, be controlled by, or be under common controlwith such given party, or a party deemed by the Company's board of directors toact in concert with such given party). (ix) Acquisition of the Stock Acquisition Rights by the Company With regard to the Stock Acquisition Rights, on a day that falls on a datedetermined by the Company's board of directors, the Company may set theconditions of acquisition which provide that the Company may acquire all of theStock Acquisition Rights that have not been exercised before or on the dayimmediately prior to the date determined by the Company's board of directors,that are held by parties other than the Nonqualified Persons and, in exchange,deliver shares of the Company in the number of the applicable Number of Sharesfor every Stock Acquisition Right. In this case, if, after the date upon whichthe acquisition takes place, the Company's board of directors recognizes theexistence of any party holding the Stock Acquisition Rights other thanNonqualified Persons, the Company may, on a day falling on a date determined bythe Company's board of directors after the date upon which the acquisition bythe Company takes place, acquire all of the Stock Acquisition Rights held bythat party that have not been exercised by or on the day immediately prior to adate separately determined by the Company's board of directors (if any) and, inexchange, deliver shares of the Company in the number of the applicable Numberof Shares for every one Stock Acquisition Right. The same will applythereafter. 4. Effective period and amendment and abolition of the Plan The Plan will become effective upon approval by the majority of voting rights ofthe shareholders present at the 35th Ordinary General Meeting of Shareholders tobe held on June 28, 2007. If the Plan is approved at the meeting, its effectiveperiod will be for a period of three (3) years from the end of such meeting tothe end of the ordinary general meeting of shareholders relating to the fiscalyear ending March 2010. If the board of directors passes a resolution to abolish the Plan, even duringthe effective period of the Plan, based on the recommendation of the IndependentCommittee or the board of directors' own decision, the Plan will be abolished atthat time. Even during the effective period of the Plan, if a change in thePlan is necessary, the Company will review the Plan in accordance with therecommendation of the Independent Committee from time to time, and seek theshareholders' judgment as to the change at the nearest ordinary general meetingof shareholders to be held. If the Plan is abolished or amended, the Companywill promptly disclose facts including the fact that such abolition or amendmenthas taken place, and (in the event of an amendment) the details of the amendmentand any other matters. 5. Rationale of the Plan (1) Establishment of the Independent Committee In order to eliminate arbitrary triggering by the board of directors of theCompany and ensure the fairness and reasonableness of the procedures anddecisions, the Company will establish the Independent Committee, which willconsist of outside directors, outside auditors or outside experts. TheIndependent Committee, as an advisory body to the board of directors, will checkwhether the Large-scale Acquisition Rule is complied with, consider details ofacquisition and countermeasures, and recommend to the board of directors whetherthe countermeasures should be triggered. The Independent Committee will makedecisions with regard to the evaluation and consideration of the matter pursuantto the 'Countermeasure Policy in Case of the Large-scale Acquisition' set outabove at section 3 (5), and the board of directors of the Company will respectthe recommendation of the Independent Committee to the maximum extent possible. The number of the Independent Committee members will be no less than three (3)in principle, and the term of office of the members will be until the end of themeeting of the board of directors held immediately following the latest OrdinaryGeneral Meeting of Shareholders relating to the fiscal year ended within one (1)year from election in principle (With regard to outline of the Rules of theIndependent Committee and names and career summaries of initial members of theIndependent Committee, please see Exhibit 1 and Exhibit 2, respectively.). (2) Placing value on the intent of Shareholders The Company will introduce the Plan subject to approval by the shareholders atthe Ordinary General Meetings of Shareholders in order to reflect the intent ofthe shareholders on the Plan. As set out above in section 4, 'Effective periodand amendment and abolition of the Plan,' even before expiration of theeffective period, the Plan may be abolished by a resolution of the Company'sboard of directors. (3) Advice of outside experts The board of directors, auditors and the Independent Committee of the Companymay obtain advice from independent experts such as financial advisors, certifiedpublic accountants, lawyers, consultants, etc. at the Company's expense, ifnecessary, in order to enhance the fairness and reasonableness of theconsideration and decisions by the Board or Directors, Auditors and theIndependent Committee. (4) Establishment of reasonable objective requirements As set out above in section 3 (5), 'Countermeasure Policy in Case of theLarge-scale Acquisition', the countermeasures of the Plan are established sothat they will not be triggered unless the predetermined reasonable objectiverequirements have been satisfied, and maximum value will be placed onrecommendation of the Independent Committee, to ensure a structure to eliminatearbitrary triggering of countermeasures by the board of directors of theCompany. (5) Satisfying the requirements of the Guidelines for Takeover DefenseMeasures The Plan satisfies the three principles set out in the "Guidelines RegardingTakeover Defense for the Purposes of Ensuring and Enhancing Corporate Value andShareholders' Common Interests" released by the Ministry of Economy, Trade andIndustry and the Ministry of Justice on May 27, 2005. (6) No dead-hand takeover defense measures As stated in section 4, 'Effective period and amendment and abolition of thePlan', the Plan may be abolished at any time by the board of directors composedof directors elected by a General Meeting of Shareholders of the Company, andthe Plan is set up so that the Large-scale Acquirer may elect, at a GeneralMeeting of Shareholders of the Company, directors nominated by that person and,through a resolution of the board of directors of the Company attended by theso-elected directors, that person may abolish the Plan. Therefore, the Plan isnot a dead-hand takeover defense measure (a takeover defense measure in whicheven if a majority of the members of the board of directors are replaced, thetriggering of the measure cannot be stopped). (7) The Company's decision in respect of the Plan The Plan provides for the details of the Large-scale Acquisition Rule, and theaction policy and the countermeasure when a Large-scale Acquisition is made. Italso prescribes that in order to enable the shareholders to make a decisionwhether or not to accept the Large-scale Acquisition, the Acquirer who makes theLarge-scale Acquisition shall provide information and launch such Acquisitiononly after a certain evaluation period set by the board of directors of theCompany has passed, and that the board of directors of the Company may takecountermeasures against such Acquirer who does not comply with such provisions.It is also prescribed that even if the Acquirer complies with the Large-scaleAcquisition Rule, when the Large-scale Acquisition is deemed to have a materialadverse effect on the corporate value of the Company or the common interests ofthe shareholders, the Company may also take countermeasures against suchAcquisition. Based on the above, we believe that the Plan is in conformity withthe Basic Policy. In addition, based on (1) to (6) above, we believe that thePlan does not adversely affect the common interests of the shareholders nor hasas its aim the protection of offices of the officers of the Company. 6. Impact on shareholders and investors (1) Impact on shareholders at the time of introduction At the time of the introduction of the Plan, the Plan will have no direct orspecific impact on shareholders, since no actual allotment of Stock AcquisitionRights without contribution will be made. The Large-scale Acquisition Rule intends to provide the necessary informationfor shareholders to decide whether or not to accept the proposal of theLarge-scale Acquisition and the opinion of the Company's board of directors whois actually engaging in the management of the Company, and to secure anopportunity for the shareholders of the Company to be presented an alternativeproposal. On this point, the shareholders of the Company can make a properdecision whether or not to accept the proposal of the Large-scale Acquisitiononly with sufficient information, which will accordingly contribute to theprotection of the corporate value of the Company and the common interest ofshareholders. Based on the above, we believe that the establishment of theLarge-scale Acquisition Rule is unavoidable for the shareholders of the Companyand the investors to make a proper investment decision, and contributes to theinterests of the shareholders of the Company and investors. As stated in 3.(5)above, since the action policy of the Company may change depending upon whetherthe Large-scale Share Acquirer is subject to the Large-scale Acquisition Rule ornot, the shareholders of the Company and investors shall pay attention to theactions of the Large-scale Share Acquirer. (2) Impact on shareholders and investors at the time of the gratisallotment of Stock Acquisition Rights If the board of directors of the Company resolves to implement an allotment ofStock Acquisition Rights without contribution, the Company will implement anallotment of Stock Acquisition Rights without contribution to all registered shareholders of the Company as of the Record Date of Allotment at a ratio of oneStock Acquisition Right per one share. If the shareholders do not comply withany required payment for the allotment and procedures for the exercise of StockAcquisition Rights detailed in (3) "Necessary procedures for shareholders uponthe allotment of Stock Acquisition Rights without contribution" (ii) belowwithin the rights exercise period, the shares they hold in the Company will bediluted by the exercise of Stock Acquisition Rights by other shareholders.However, there may be possibilities that the Company will acquire the StockAcquisition Rights of all shareholders other than the Nonqualified Person and,in exchange, deliver shares in the Company, in accordance with the proceduresset out in (3) "Necessary procedures for shareholders upon the allotment ofStock Acquisition Rights without contribution" (iii) below. If the Companycarries out such acquisition procedures, all shareholders other than theNonqualified Person will come to receive shares in the Company withoutexercising their Stock Acquisition Rights or paying an amount equivalent to theexercise price, and no dilution of the value of the aggregate shares in theCompany they hold will result (only dilution of the value per share of shares inthe Company they hold will result). Furthermore, in certain events such as withdrawal of the Large-scale Acquisitionby the Large-scale Acquirer, the Company may cancel its allotment of StockAcquisition Rights without contribution after the Record Date of Allotment orthe effective date of the allotment of Stock Acquisition Rights withoutcontribution, or acquire Stock Acquisition Rights before commencement date ofthe exercise period of the Stock Acquisition Rights without consideration andwithout delivering no shares to the holders of Stock Acquisition Rights. Insuch event, those shareholders who sold or purchased the shares in the Companybased on the assumption that dilution of the value per share of the shares inthe Company will occur might suffer damage commensurate with and due tofluctuations in the value of the shares. (3) Necessary procedures for shareholders upon the allotment of StockAcquisition Rights without contribution (i) Procedures for entry of name change If implementation of an allotment of Stock Acquisition Rights withoutcontribution is resolved, it will be necessary for shareholders to arrange forthe procedures for entry of name change as soon as possible, since those who donot complete the entry of name change by the Record Date of Allotment,determined separately by the board of directors and publicly notified (Noprocedures for entry of name change are required for those share certificatesdeposited with the Japan Securities Depositary Center, Inc.). In connection with this, all shareholders who are registered or recorded in thelast register of shareholders or register of beneficial shareholders of theCompany as of the Record Date of Allotment will become the holders of StockAcquisition Rights as a matter of course on the effective date of the allotmentof Stock Acquisition Rights without contribution. (ii) Procedures for exercising Stock Acquisition Rights The Company will deliver, as a general rule, an exercise request form for theStock Acquisition Rights (in a form prescribed by the Company) and otherdocuments necessary for the exercise of the Stock Acquisition Rights to allshareholders registered or recorded on the last register of shareholders orregister of beneficial shareholders of the Company as of the Record Date ofallotment. After the allotment of Stock Acquisition Rights withoutcontribution, the shareholders will be issued such number (not more than one) ofshares in the Company as determined by the Company's board of directors per oneStock Acquisition Right, by paying to the place handling agent such payments theamount of property to be paid for the exercise of Stock Acquisition Rightsduring the exercise period. (iii) Procedures for the acquisition of Stock Acquisition Rights by theCompany If the Company's board of directors resolves to acquire the Stock AcquisitionRights, the Company will acquire the Stock Acquisition Rights in accordance withthe statutory procedures, on a date separately resolved by the Company's boardof directors. When the Company is to deliver shares of the Company toshareholders in exchange for the acquisition of Stock Acquisition Rights, itshall do so promptly. Further, in such case, the shareholders concerned are notrequired to take procedures for exercising Stock Acquisition Rights prescribedin (ii) above, including the payments, but will be separately requested tosubmit, in a form prescribed by the Company, representations and warrantiesregarding matters such as the fact that they are not a Nonqualified Person, aswell as indemnity clauses and other covenants. In addition to the above, theCompany will disclose information or notify all of its shareholders with respectto the particulars of the allotment method, method of procedures for entry ofname change, exercise method and method for acquisition by the Company after anyresolution of the board of directors of the Company in relation to an allotmentof Stock Acquisition Rights without contribution, so we would like to askshareholders to check these details at that time. Exhibit 1 Outline of the Rules of the Independent Committee 1. Constitution • The Independent Committee shall have a high level of discernment orsophisticated expertise in business management and consist of outside directorsof the Company, outside statutory auditors of the Company and outside expertswho are independent from the directors and officers which conduct the executionof the business of the Company; and there shall be no less than three (3)members of the Independent Committee as a general rule. E Members of the Independent Committee shall be elected by a resolution ofthe board of directors of the Company. 2. Term of Office • The term of office of members of the Independent Committee shall be untilthe end of the term of the board of directors of the Company immediately afterthe ordinary general meeting of shareholders relating to the final term of thefiscal year ending within a year the members have been elected is held, andre-appointment of such members shall not be precluded. Unless otherwisedetermined by a resolution of the board of directors that the term of office ofmembers is expired, they shall be deemed to be reappointed by such board ofdirectors of the Company; provided, however, that if any member who is anoutside director of the Company or outside statutory auditor of the Companyceases to be an outside director of the Company or outside statutory auditor ofthe Company, the term of office of any member of the Independent Committee shallend at the same time. 3. Authority and Responsibility • The Independent Committee shall comply with an advisory from the board ofdirectors, consider and resolve mainly the particulars mentioned below, andsubmit recommendation to the board of directors of the Company containing thedetails of and reasons for the recommendation. (a) Determination whether the Large-scale Acquisition Rule is complied with (b) Determination whether the Large-scale Acquisition that is subject to the Plan seriously undermines the corporate value of the Company or the common interest of those shareholders (c) Determination whether information that the Large-scale Acquirer provides is necessary and adequate (d) Determination whether the extension of the Evaluation Period of Acquisition is necessary (e) Necessity of implementation of countermeasures (f) Necessity of cancellation of a countermeasure (g) Necessity of abolition or amendment of the Plan. In addition to the matters prescribed above, the Independent Committee mayconduct the matters listed below complying with an advisory and a request fromthe board of directors. (a) Determining the information that the Large-scale Acquirer and board ofdirectors of the Company should provide to the Independent Committee, and thedeadline for the provision of that information. (b) Examination and consideration of the terms of the Large-scaleAcquisition by the Large-scale Acquirer. (c) Negotiation and discussion with the Large-scale Acquirer (d) Request for an alternative proposal and consideration of the alternativeproposal to the board of directors of the Company. • If the Independent Committee decides that the information of theLarge-scale Acquisition is inadequate or insufficient, it shall request theLarge-scale Acquirer to submit additional information. Further, if theIndependent Committee receives from the Large-scale Acquirer the information ofthe Large-scale Acquisition and any additional information that it requests, itmay request the board of directors of the Company to provide within a certainperiod an opinion on the terms of the Large-scale Acquisition by the Large-scaleAcquirer and materials supporting that opinion, alternative proposal, and anyother information that the Independent Committee may consider necessary fromtime to time. • In order to collect the necessary information, the Independent Committeemay request the attendance of a director, statutory auditor or employee of theCompany, or any other party that the Independent Committee considers necessary,and may require explanation of any matter it requests. • The Independent Committee may, at the Companyfs expense, obtain the adviceof an independent outside expert (including financial advisors, certified publicaccountants, lawyers, consultants and other experts) and similar actions. • The Independent Committee must make decisions with a view to securing andimproving the corporate value of the Company and, in turn, the common interestof its shareholders, and each member must not serve the purpose of its owninterests or those of third parties, including the management of the Company. • Respecting recommendations by the Independent Committee, the board ofdirectors of the Company shall make a resolution concerning the implementationof countermeasures and other matters. 4. Resolution • A resolution of a meeting of the Independent Committee shall, as a generalrule, pass with a majority when all the members except for the specially relatedparties are in attendance; provided, however, that when members who are involvedin accidents or caught in unavoidable circumstances, a resolution may pass witha majority of the members present (such present members shall consist of themajority of all members). Exhibit 2 Names and Career Summary of Members of the Independent Committee Tomokazu Godai Born on October 6, 1939June 1975 Appointed as President of Maya Shoji Co., Ltd. (currently MAYATEC Co., Ltd.)May 1992 Appointed as Director of the Company (present post)June 2006 Appointed as Board Chairman and CEO, MAYATEC Co., Ltd. (present post) Hiroyuki Mizuno Born on April 20, 1929June 1990 Appointed Vice-president of Matsushita Electric Industrial Co., Ltd.August 1994 Appointed as Consulting Professor of Stanford UniversityApril 1998 Appointed as Center President of Hiroshima Prefectural Institute of Industrial Science and Technology (present post)June 2001 Appointed as Director of the Company (present post)June 2002 Appointed as Director of MegaChips Corporation (present post) Noboru Onuma Born on January 1, 1948April 1970 Appointed as Mitsui Bank (currently Sumitomo Mitsui Banking Corporation)April 1998 Appointed as General Manager, Fukuoka Branch of the said bankApril 1999 Appointed as Administration Officer of said bankJune 1999 Appointed as Standing Corporate Auditor of the Company (present post) Exhibit 3 Present Status of Major Shareholders of the Company Major shareholders of the Company as of March 31, 2007 is as follows. Name of Shareholders Contribution status to the Company Number of Shares Controlling held Share (%) (thousand shares)Kozuki Foundation for Sports and Education 14,330 10.44Kozuki Holding B.V. 13,530 9.86THE MASTER TRUST BANK OF JAPAN, LTD. (TRUST ACCOUNT) 9,238 6.73JAPAN TRUSTEE SERVICES BANK, LTD. (TRUST ACCOUNT) 8,581 6.25Kozuki Capital Corporation 7,036 5.13The Chase Manhattan Bank, N.A. London 4,963 3.62Sumitomo Mitsui Banking Corporation 4,135 3.01BNP PARIBAS Securities (Japan) Limited 3,488 2.54State Street Bank and Trust Company 2,417 1.76CALYON DMA OTC 2,312 1.68 (Note) The total number of issued shares is 143,555,786. Controlling share iscalculated after deduction of its own share (6,300 thousand shares). Paste the following link into your web browser to download the PDF document related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/0366x_-2007-5-22.pdf This information is provided by RNS The company news service from the London Stock Exchange